Small-Dollar Lending Innovation and the True Cost of Credit

This report analyzes the role small-dollar credit — such as payday loans and other short-term loans — plays in providing Americans with needed financial services. It argues that these loans meet a legitimate demand for cash liquidity for millions of Americans, especially those with poor credit and those who are essentially shutout of the conventional banking system. Despite this, small-dollar, short-term loans are regularly criticized for being "predatory" and harmful. The report argues, however, that from the perspective of the consumers of these loans, these products meet an important need and limiting their availability through regulation would harm millions of Americans, especially low-income households.